HELOC approval requirements: credit score, DTI, income and more​

HELOCs can be powerful resources that homeowners who meet lender requirements can use to fund any expenses they may have.  

Checking to see what the approval requirements are for a home equity line of credit, or HELOC, could help you determine if it is the right time to access your home’s equity. HELOCs offers you a line of credit based on a portion of your home equity, which you can access as needed during the draw period. 

Is a HELOC the right option for you? Start your application today. 

What are the credit score requirements for a HELOC?

Many lenders look for a minimum credit score of 600 as part of the HELOC approval process. Since a HELOC is a type of second mortgage, which is considered higher risk than first mortgages, the required credit score is usually higher than for a first mortgage. 

A higher credit score than required could get you a better rate on your HELOC and increase your chances of getting your HELOC approved. 

What are the debt-to-income ratio requirements for a HELOC?

The typical debt-to-income (DTI) ratio requirements for a HELOC that lenders require is a maximum of 43%. Rate allows a DTI ratio of less than 50%. 

A DTI ratio gives lenders an idea of how much of your income goes to paying off other debts. The lower a DTI ratio you have, the better chance of your HELOC being approved and you getting a better rate. 

How much income and what employment level do I need for a HELOC?

When getting a HELOC, lenders typically look for borrowers to have at least two years of continuous employment and stable and verified income. Lenders will use this information to make sure you will not have trouble making future payments. 

Your two years of continuous employment does not need to be at the same company, just in the same role with pay stubs and tax returns for these two years. If you are self-employed, lenders may ask to see three years of income, tax returns and bank statements. 

Is there a required loan-to-value ratio for a HELOC?

Yes, lenders will require a maximum loan-to-value (LTV) ratio for a HELOC. 

An LTV ratio compares the amount of mortgage on a property to the property’s value. When applying for a HELOC, most lenders require borrowers to have a LTV ratio of 80% to 85% to qualify, or 15% to 20% home equity. 

What kind of payment history do I need for a HELOC?

Since HELOCs are typically second mortgages, lenders will want to check and make sure you are up to date on all your first mortgage payments as well as any other loans you may have. Lenders will also check to make sure all payments were made on time and that no loans are in default.  

Do I need to have property ownership verified to get a HELOC?

Yes, when you are getting a HELOC, you will need to have your property ownership verified. As part of your HELOC application process, you will need to provide a copy of your deed with your name on it.  

However, if you are only cosigning on a HELOC, your name does not need to be on the deed. 

Which documents do I need for a HELOC?

When you apply for a HELOC, here are some documents your lender will need to see. 

• Government-issued photo ID
• Recent mortgage statements
• Proof of homeownership
• Insurance information
• Property appraisal
• Recent pay stubs
• Tax returns or W-2s for the past two years

• Bank statements or retirement and investment account statements

How can I start the HELOC application process today?

You can start the HELOC application process today online through a trusted lender like Rate. 

When you begin your online application with Rate, you will be connected to a professional Loan Officer. This Loan Officer will help you through the application process and answer any questions you may have about your HELOC.  

Ready to start the HELOC process? Begin your HELOC application today. 

_{Rate’s home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions apply.}